The reason for this is because Canada is officially bilingual, and everything has to be in French and English. And since "government" is spelled "gouvernement" in French, some have said that .gov.ca would not be bilingual, since you would presumably shorten it down to .gouv.ca or something for French (at least, that's what France does).

The problem is, that pretty much everyone else in the world uses .gov.xx to designate government sites, and it's very confusing to them to see .gc.ca

Further, Canada isn't France (which is uni-lingual) and if you look at other countries that have French as an official language, you see that uni-lingual French countries (Monaco, French Guiana) tend to use .gouv.xx, but multilingual countries tend to use .gov.xx (Belgium, Switzerland).

Unfortunately, no one uses .gc.xx or anything similar. It's all well and good to be different, but not when no one outside your country understands you. The idea behind the web is to communicate, not isolate.

So, to make a long story short, the Canadian Government now owns .gov.ca.

Ministry Sites will still use .gc.ca, of course, but .gov.ca is now being added to .ca as sites run by the Canadian Government that are aimed at the public, especially non-Canadians.

Based on a LOT of feedback and experience, this is likely to be a very popular move, as well as opening up more opportunities for the government to register useful and memorable domains while still maintaining the fact that they are government.

Right now, .gc.ca is used mostly by Ministries and ultra-official sites. Many of the sites the government runs are multi-departmental or other initiatives that don't easily fall under the .gc.ca umbrella currently use .ca, but that is confusing to people because anyone can register a .ca, so there is no indication that it's authoritative or government run.

Further, non-Canadians tend to automatically assume that Canadian government sites use .gov.ca. I know this personally from many, many discussions.